Question 10.4: Including Disbenefits in a B−C Analysis Refer back to Exampl...
Including Disbenefits in a B−C Analysis
Refer back to Example 10-2. In addition to the benefits and costs, suppose that there are disbenefits associated with the runway extension project. Specifically, the increased noise level from commercial jet traffic will be a serious nuisance to homeowners living along the approach path to the Columbia Municipal Airport. The annual disbenefit to citizens of Columbia caused by this noise pollution is estimated to be $100,000. Given this additional information, reapply the conventional B–C ratio, with equivalent annual worth, to determine whether this disbenefit affects your recommendation on the desirability of this project
| Disbenefits reduce B–C = [AW(B) − AW(D)]/[CR + AW(O&M)] benefits,
Equation (10-5) B–C = [$490,000 − $100,000]/[$1,200,000 (A/P, 10%, 20) + $197,500] B–C = 1.152 > 1; extend runways. |
|||||||
| Disbenefits treated as additional B–C = AW(B)/[CR + AW(O&M) + AW(D)] costs,
Equation (10-6) B–C = $490,000/[$1,200,000 (A/P, 10%, 20) + $197,500 + $100,000] B–C = 1.118 > 1; extend runways. |